|Bid||78.55 x 1000|
|Ask||78.58 x 800|
|Day's Range||78.17 - 80.45|
|52 Week Range||73.18 - 114.14|
|Beta (5Y Monthly)||0.85|
|PE Ratio (TTM)||11.66|
|Forward Dividend & Yield||0.75 (0.95%)|
|Ex-Dividend Date||Nov 13, 2019|
|1y Target Est||N/A|
The energy sector is comprised of companies focused on the exploration, production, and marketing of oil, gas, and renewable resources around the world. Well-known companies in this group include Occidental Petroleum Corp. (OXY) and EOG Resources Inc. (EOG). Downstream companies that include HollyFrontier Corp. (HFC) refine and process oil and gas products for delivery to consumers .
Domestic oil drillers may again remove rigs since explorers have decided to curb spending on the drilling of new wells for the second straight year in 2020.
(Bloomberg Opinion) -- The heart of America’s oil renaissance is found in the Permian basin, which is showing signs of maturing fast. And for shale basins, that’s not a good thing. If the rich petroleum region wanes, U.S. oil independence will remain elusive and the OPEC cartel may finally see off its greatest threat.The Permian, spread across west Texas and southeast New Mexico, yields more than a third of all U.S. oil production and it has contributed about two-thirds of the past three years’ worth of growth. Its boom has allowed America to export more than 3 million barrels a day of crude on a regular basis since May — more than every OPEC country except Saudi Arabia and Iraq. But the U.S. still imports twice that volume. A slowdown in the Permian would see that gap widen again.Output from the region, where oil was first discovered by W.H. Abrams a century ago with a well that produced just 10 barrels a day, is hitting new heights. Production has continued to grow in recent months despite a drop in the number of rigs drilling in the basin, which fell by 17% last year, according to data from the Energy Information Administration, as the chart above shows. But that cannot last forever.The latest edition of the EIA’s Drilling Productivity Report, published on Tuesday, shows that the Permian rig count fell to 402 in December, down from 485 a year earlier. Partly offsetting that decline, operators are getting more new oil per rig. But the chart below shows that the biggest increases in efficiency coincided with the steepest declines in the rig count — suggesting the improvement came through a renewed focus on the most productive parts of the play, rather than some technical breakthrough. Those strong gains have not been sustained.The report also breaks out production from new wells — those in their first full month of operation — and legacy production from all of the rest. This is particularly important in the shale deposits because of the rapid drop in output once a well is brought into use. Production from new wells has to more than offset the declines from a growing number of older wells for overall output to grow.The EIA data allow us to generate production profiles under various assumptions about rig counts, new well production rates and legacy-well declines. The results are worrying for those depending on ever-growing Permian output.Here are the basic parameters I used to generate production profiles:Legacy-well production decline: The EIA shows production from legacy wells falling by 277,000 barrels a day in January. The figure increased at an average rate of 3,500 barrels each month over the previous year, and I have applied that going forward. So the projected decline in February is 280,500 barrels a day, in March it is 284,000, and so on. Rig count: I have used three different rig counts. One is flat at 400 rigs from January, the second increases the count by 5 rigs per month to reach 447 by September and is then flat at 450 rigs thereafter. The third sees the rig count continuing to fall by three per month until April, before stabilizing at 390. New production: This is either assumed to stay constant at 810 new barrels per rig, or — in the most optimistic case — to rise by five barrels per month. That’s broadly in line with the average increase of 6 barrels per rig per month seen in 2019.Combinations of those parameters give the four production profiles shown in the chart below.With the rig count flat at 400 units and the average new output per rig at 810 barrels a day — where we are now — Permian basin production will peak in just over a year’s time, in Feb. 2021. After that it will start to fall at an accelerating rate as the burden of legacy-well declines continues to grow. If the rig count falls by just 10 more units by this April, the peak will occur this year. Before anyone starts shouting that this is too gloomy, the outlook is perfectly compatible with the views of the companies such as EOG Resources Inc., Pioneer Natural Resources Co. and Diamondback Energy Inc., which see their output growing by 12% or more this year. Even in the most pessimistic case above, the year-on-year increase in production in 2020 is 12.7%.The dominant position of the Permian means that other shale basins will struggle to offset its decline. The peak may be delayed by the trove of drilled, but uncompleted wells — known as DUCs — which now stands at over 3,600 in the Permian. They can be brought into production without the need for rigs, but that stockpile is already being drawn down to support production growth.Even when the Permian does peak, the U.S. will remain a major oil producer and a significant exporter. But OPEC oil ministers will breathe a sigh of relief at the first sign that the shale gale may be starting to blow itself out.To contact the author of this story: Julian Lee at firstname.lastname@example.orgTo contact the editor responsible for this story: Melissa Pozsgay at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Julian Lee is an oil strategist for Bloomberg. Previously he worked as a senior analyst at the Centre for Global Energy Studies.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Domestic drillers may again remove rigs since explorers have a conservative capital budget in place and have decided to curb spending on drilling new wells.
Free cash flow used to be a rare commodity among oil and gas stocks, but companies have gotten the message that investors won’t buy stocks that don’t produce it.
The Zacks Analyst Blog Highlights: Callon Petroleum, Diamondback Energy, Pioneer Natural Resources and Concho Resources
Domestic drillers may continue to remove rigs since explorers have a conservative capital budget in place and have decided to curb spending on the drilling of new wells.
The Dow Jones Industrial Average lost 60 points, or 0.21%. The S&P 500 dropped 0.02%, and the Nasdaq Composite was down 0.02% as well.
Given that shale drillers will probably generate handsome free cashflows in 2020, it would be ideal to keep an eye on the following Permian explorers that are poised to gain.
Diamondback's (FANG) 2019 average daily production rose 27% to 283 MBOE/D from 221.1 MBOE/D in 2018 with oil volumes increasing 26% year over year.
Sony, Funko, EOG Resources, Diamondback Energy and Chevron highlighted as Zacks Bull and Bear of the Day
Domestic drillers may continue to remove rigs since explorers have a conservative capital budget in place and have decided to curb spending on drilling new wells.
Napoleon Bonaparte once said that his army marched on its stomach – by which he meant, of course, that no amount of military genius would help him if he let his troops outrun their supply wagons. Food and water are as important as guns and ammunition to an army.By analogy, our economy marches on oil. Factories and power plants, cars and trucks, computers and smartphones – none of them run by themselves, they all need a source of energy. Which puts energy companies – and the investors who buy their stocks – in a potentially enviable position. They occupy a “necessary niche,” one that customers will always need, in good times or bad, booms or busts.International banking firm Credit Suisse has released a year-end report on their favorite energy stocks, those that the firm’s analysts believe have potential to lead their sector in growth for 2020. Hindsight being perfect, we won't know the actual results until next December – but we can analyze the companies and their market positions, and make intelligent estimates of near-term performance.This is where TipRanks, a company that tracks and measures the performance of Wall Street’s financial analysts, offers an invaluable service. In addition to tracking the analysts, TipRanks also collects and collates data on more than 6,400 publicly traded stocks. A variety of search and filter tools, from the classic Stock Screener tool are available to make it easy to use the raw data.We’ve gotten the process started for you, by pulling up the information on three of Credit Suisse’s top 2020 energy plays.Sunrun, Inc. (RUN)Sustainability is all the rage in energy, as environmentalists, activists, investors, and just plain old concerned citizens want to ensure a cleaner future. New tech has made it possible to extract fossil fuels from previously marginal reserves, and scrubbers exist to keep pollutants from the air – but drilling and burning still do environmental damage. Solar energy is one option as providers and customers consider switching, and here, too, new technology has improved the available choices. Sunrun, a company providing residential solar options, is clear example.Sunrun offers customers three choices for adding solar power generation to their homes: a lease model, in which the company installs and owns photoelectric panels, and the customer uses the power generated to reduce electricity bills; a model, in which solar panels charge batteries which are then used to reduce grid power use during peak rate hours – or replace it during an outage; and a purchase system, in which the customer buys solar power generation technology, has it installed, and enjoys the benefits.The company has leveraged demand for its products to produce quarterly profits since Q2 2019, and build up a $1.63 billion market cap. Sunrun’s Q3 earnings, reported in November, missed the forecasts but showed strong year-over-year gains. EPS was up to 23 cents, from a 2-cent loss the year before, while revenues gained 5% year-over-year to hit $215.5 million.Credit Suisse’s Michael Weinstein makes RUN stock a ‘top pick,’ writing, “We expect them to grow deployments >15%/yr... RUN continues to retain the highest market share (16.2%) with robust project profitability ($1/W NPV), cash generation ~$100M annually, and a $50M stock buyback program over the next three years.”Weinstein puts a $24 price target on RUN, suggesting an impressive upside potential of 73% for the stock. (To watch Weinstein’s track record, click here)Sunrun has a Strong Buy rating from the analyst consensus, with 4 Wall Street reviewers giving the stock a Buy rating during Q4 2019. The stock sells for just $13.81, so even the low-ball price target of $18 would represent significant gains for investors. The average price target, $22, implies a strong upside of 58%. (See Sunrun stock analysis at TipRanks)Diamondback Energy (FANG)Texas is the epicenter of the American oil boom, and Diamondback is a mid-sized player in the rich Permian Basin in the western part of the states. The company engages in oil exploration and drilling operations, and produces more than 130,000 barrels of oil equivalent per day. Diamondback, while not an industry giant, is playing an important part in the Texan fracking industry that has in recent years made the US the world’s largest oil producer.Low prices, however, can hurt even the strongest companies. The low-price regime that dominated 2019’s oil market held FANG to a mere 1% gain for the year. The Q3 numbers, reported in November, showed the result – earnings were down, both year-over-year and against the estimates, even though revenues were up. Increased production did not quite make up for the lower product prices. Put into numbers, the EPS was still strong at $1.47, and revenues reached $975 million.FANG paid out a dividend of 18.75 cents per share, for an annualized payout of 75 cents and a decidedly modest yield of 0.81%. That yield is roughly half the sector average – but it is reliable, as FANG has been maintaining or raising the dividend for the last two years, and with a payout ratio of just 12%, it is easily sustainable.Company management recently revised down their 2020 production guidance, putting it into line with 2019’s actual numbers – and the company underperformed the sector last year. Credit Suisse analyst Betty Jiang looked at management’s action and sees in it reason to believe that FANG will improve performance in the coming year. She writes, “While management has made a concerted effort (with much improved disclosure) to explain the factors that drove the downward revision, we continue to field questions on the impact of co-development on 2020 well productivity and perhaps more importantly, whether this is truly a one-time reset (our answer is “yes”)... Based on our work, we believe FANG’s revised 2020 production is achievable while they will likely continue to be successful in driving down costs.”Jiang puts a $116 price target on FANG shares, showing her confidence in a 25% growth potential. (To watch Jiang’s track record, click here)The analyst consensus on FANG is not unanimous, but almost. The Strong Buy consensus rating is supported by 15 Buys against a single Hold – Wall Street is sanguine about this stock. Shares sell for $91.67, and the average price target of $122.27 indicates an upside of 31%. (See Diamondback stock analysis at TipRanks)Baker Hughes Company (BKR)With Baker Hughes, we move power sources (solar or crude oil) to support services. BKR is an oilfield services company, offering the specialized tech and engineering knowledge and tools that the oil and gas industry needs. Baker Hughes’ services allow exploration companies to evaluate area geology, complete wells, and support drilling operations. The company offers support in the upstream, midstream, and downstream segments of the industry.Two key numbers from 2018 show both the scale and headwinds of the oil industry. Baker Hughes brought in over $22.8 billion in revenues that year – but showed a net income of just $195 million. The oil industry may have a captive audience for its products, and generate large amounts of cash, but high overhead and variable market prices cut deeply into margins.Last fall, BKR entered into a partnership with C3.ai and Microsoft, a three-way joint venture to develop ai cloud-based AI software solutions for the oil industry. The three companies are leaders in their sectors, and bring together high-end expertise in oilfield support, cloud computing, and AI software. Baker Hughes CEO Lorenzo Simonelli described the venture as “a singular offering that can accelerate digital transformation across the sector, energy businesses can now draw on the power of Microsoft’s cloud, C3.ai’s leading AI capabilities, and Baker Hughes’s expertise in the energy industry.”Just two weeks before announcing the partnership, BKR had reported strong Q3 earnings. Revenues and EPS both gained year-over-year, with the top line hitting $5.88 billion and EPS coming in at 21 cents. During the quarter BKR also improved its free cash flow, generating an FCF of $161 million.Jacob Lundberg, reviewing the stock for Credit Suisse, took a bullish stance, writing, “We met with C3.ai’s Tom Siebel at the company’s headquarters in Redwood City, CA, to learn more about C3’s technology and its partnership with BKR. We walked away from the meetings more bullish on the prospects for BKR to drive a meaningful and sustainable competitive advantage… stemming from its early adoption of and exclusive access to C3’s technology… the directional impact is clearly positive.”Lundberg put a $28 price target on BKR, backing up a Buy rating. His target suggests a 9% upside to BKR stock. (To watch Lundberg’s track record, click here)BKR is another stock with a unanimous Strong Buy consensus rating, this one backed by 9 recent Buy reviews. The $29 average price target suggests an upside premium of 14% from the $25.43 current share price. (See Baker Hughes stock analysis at TipRanks)
The simplest way to invest in stocks is to buy exchange traded funds. But the truth is, you can make significant gains...
The Energy Select Sector SPDR (NYSE: XLE), the largest exchange traded fund dedicated to that sector, is up just 8% in 2019 with about half that gain being accrued just this month. Whether it's the December uptick in the energy sector or the group's status as a value destination, analysts are bullish on the sector heading into 2020. “At the sector level, analysts are most optimistic on the Energy (66%), Health Care (59%), and Communication Services (59%) sectors, as these three sectors have highest percentages of Buy ratings,” according to FactSet research.
Domestic drillers may continue to remove rigs since explorers have a conservative capital budget in place and have decided to curb spending on drilling new wells.
DEEP DIVE (This is the first in a three-part series listing highly rated stocks that sell-side analysts expect to rise the most over the next 12 months. This article covers large-cap stocks. Part 2 covers mid-cap stocks and part 3 covers small-caps.